China car finance player targets US IPO
Meili Auto, a Chinese car financing platform, has filed for US IPO. Its backers include Gaorong Capital, China International Capital Corporation (CICC), and Lingfeng Capital.
A spin-out from online peer-to-peer lending platform Yooli in 2015, Meili facilitates loans from financial institutions to car buyers. It bears the credit risk for lenders and uses the purchased vehicles as collateral. Borrowers pay off their debts in monthly installments.
In addition to making interest payments to the financial institutions that provide the loans - the average annualized interest rate was 8.4% in the first half of 2019 - car buyers pay a service fee to Meili. This ranges from RMB2,887 ($410) to RMB10,540, representing 4.9-11.4% of the loan principal in the same period.
Default rates are rising. For the first half of 2019, 1.6% of loans were more than 30 days overdue, up from 1.3% at the end of 2018. Meanwhile, the proportion of loans more than 90 days in arrears rose from 0.7% to 0.8%. Historically, Meili engaged third-parties to repossess collateral, but the practice ceased in April due to legal and regulatory risks. The company now relies on court proceedings and direct negotiation with buyers to settle defaults.
The company's risk assessment model combines records from the national credit reference center with 43 external sources of data such as personal information, social networking activity, and location. Through this technology-enabled system, the credit approval process takes an average of 10 minutes.
Meili supplements its online presence with a network of 4,000 sales personnel who cover 75,000 car dealers across 300 cities. According to Frost & Sullivan, 80% of used car transactions in China occur offline.
The company's revenue grew 91% year-on-year to RMB1.65 billion in 2018 and gained 38% in the first of 2019 to reach RMB984 million. Net income was RMB318 million in 2018, compared to a net loss of RMB358 million in 2017. In the first half of 2019, net income rose 273% year-on-year to RMB232 million.
New Hope Group is Meili's largest institutional investor with 16.3%. Gaorong has 9.5% and CICC owns 8.9%, while Lingfeng holds 6.3%, according to a prospectus. JD.com has a 5.9% interest, obtained when its financial services subsidiary backed Meili in 2016.
The company's most recent funding round was a Series B that closed in 2018. The initial tranche was led by New Hope Group with CreditEase, Delta Capital, TH Capital, and Beijing Heju Investment Management subsequently joining.
More on Greater China
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.